R.T. Perumal vs John Deavin and Another

Rajamannar, C.J.

(1) R. T. Perumal the appellant in O. S. A. No. 11 of 1958 and D. R. Mahajan the appellant in O. S.A. No. 42 of 1958 are two share-holders in a

limited company called the Nilgiri Neergundi Estates Co. Ltd., herein after called the Neergundi Company which was incorporated on 22-7-1927 with a

paid up capital of Rs. 3,67,076, consisting of 2000 seven per cent preference shares of Rs. 75 each, and 108,538 orinary shares of Rs. 2 each. The main

object of the company was growing and selling of tea and coffee. The company owned about 1447.62 acres of land out of which about 619 acres

comprised coffee plantations and about 341 acres tea plantations. The company had no factory of its own in which the green tea leaf grown on its estate

could be processed into marketable tea. The company used to sell its tea leaves to a neighbouring company called Kil Kotagiri Tea and Coffee Estates

Company, Ltd., which will hereinafter be referred to as Kil Kotagiri Company. Perumal held 14,900 ordinary shares and Mahajan held 5900 ordinary

shares in the company on the material date. On 31-8-1955 the Neergundi company passed a special resolution which ran as follows:

""That the company be wound up voluntarily.

That it is expedient that the business of the company should pursuant to S. 208-C of the Indian Companies Act, 1913 be transferred to the kali

Kotagiri Tea and Coffee Estates Co. Ltd., upon the terms and subject to the conditions contained in the draft agreement expressed to be made between

the company and its liquidators of the one part and the said Kil Kotagiri Tea and Coffee Estates Co. Ltd., of the other part, which draft is verified by the

signature of Lionel Aldred a director of the company.

That Messrs. John Deavin, Norman Blenkinsop and John Ashton of Messrs. Fraser and Ross, Madras be appointed liquidators of the company with

joint and several powers for the purposes of such winding up at a remuneration of Rupees two thousand and that they be authorised to exercise all or any

of the powers given to a liquidator by clauses (d), (e) and (h) of S. 179 of the Indian Companies Act, 1913.

That the liquidators be and are hereby expressly authorised to execute the said agreement and to take all such steps and to do all such things as they

may deem necessary or expendient to complete the transfer of the business of the company upon the terms contained in the said agreement.

In pursuance of the said resolution an agreement of sale and purchase dated 1-10-1955 was entered into between the Neergundi company and the Kil

Kotagiri Company. The consideration for the sale and transfer was the allotment by the purchasing company, that is, the Kil Kotagiri Company to every

member of the selling company, that is, the Neergundi Company one ordinary share of Rs. 2 each in purchasing company credited as fully paid up for or

in respect of every two fully paid ordinary shares in the selling company and a cash payment of Rs. 3,75,000 plus a sum equal to all cash in hand and at

the bank at the date of completion. It was provided that the purchasing company should pay the selling company for all consumable stores belonging to

the latter and that the coffee crops for season 1954-55 be delivered to the agents of the Indian Coffee Board and all outstanding book debts to the selling

company.

On 3-9-1955 both the appellants before us sent notices to the liquidators appointed by the resolution under S. 208C of the Indian Companies Act, 1913,

requiring them to purchase their interest as provided in that section. The liquidators offered to pay to the appellants at Rs. 10 per share for the shares held

by them but the appellants refused the offer. Mr. Perumal wanted Rs. 20 per share while Mr. Mahajan wanted Rs. 24-8-0 per share. The liquidators did

not agree. After some correspondence eventually the two appellants before us filed two applications on the Original side of this court, Applns. Nos. 3254

and 3562 of 1955 inter alia praying that this court may be pleased to fix the value of the shares belonging to the two appellants and standing in their

names under the provisions of S. 208C(3) of the Indian Companies Act suo motu or by arbitration.

On these two applications Balakrishna Aiyar J., passed an order on 6-1-1956 appointing Sri P. S. Chandrasekhara Iyer retired District Judge and

advocate as the sole arbitrator for determining the price to be paid for 5900 and 14900 shares held by D. R. Mahajan and R. T. Perumal respectively in

the company. In accordance with this order Sri. P. S. Chandrasekhara Iyer after an elaborate enquiry passed his award on 17-6-1956. In and by that

award he fixed the amount payable as the price of the shares held by Mahajan at Rs. 1,11,731-4-0 and the amount payable for the shares held by

Perumal at Rs. 2,82,168-12-0. It may be stated briefly that he arrived at the value of Rs. 18-15-0 per share by first valuing the gross assets of the

company and subtracting therefrom the liabilities thus arriving at the net value of the estate and dividing the same by the number of ordinary shares,

namely, 1,08,538. He then took out an original petition, O. P. No. 275 of 1956 praying that his award may be received and suitable orders may be

passed on the petition. This petition was filed under S. 14(2) of the Indian Arbitration Act and rule 5 of the rules framed thereunder.

(2) The Liquidators of the Neergundi Company filed another petition O. P. No. 330 of 1956 praying that the award may be set aside or in the alternative

remitted back to the Arbitrator for reconsideration. Both the petitions were heard together by Balakrishna Aiyar J., and on 21-3-1957 the learned Judge

passed the following order:

The award filed in O. P. No. 275 of 1956 by Mr. P. S. Chandrasekhara Iyer, Arbitrator be and is hereby remitted back to the said arbitrator for

reconsideration and decision in the light of the observations contained in the judgment dated 21-3-1957 herein and that the said Arbitrator do submit his

decision to this Court on or before 21-7-1957.

Accordingly the Arbitrator again heard the parties by their counsel and taking into consideration the directions contained in the said order of Balakrishna

Aiyar J. and the evidence adduced before him both before and after remittal he gave his decision fixing the price payable for each share held by the

appellants at Rs. 12. The amount payable to Mahajan at that rate would be Rs. 70800 and the amount payable to Perumal in respect of the shares held

by him would be Rs. 1,78,500. We have ascertained from the records that both the appellants before us filed objections to the decision of the Arbitrator

after remittal which was in the nature of a revised award.

The main objection was that the order of remittal passed by Balakrishna Iyer J., on 21-3-1957 was untenable in law. When the matter came up before

Balakrishna Aiyar J., finally on 15-10-1957 the only point pressed before him was as regards costs. After giving certain directions as to costs in the

proceedings before him he passed a decree in terms of the revised award. The petitions were again mentioned before the learned Judge on 21-11-1957

on which date in terms of the revised award the following decree was passed.

That the respondents 3 to 5 in O. P. No. 275 of 1956 pay to (a) respondent 1 herein a sum of Rs. 70800 (Rs. seventy thousand eight hundred) being

the value of 5900 shares and (b) respondent 2 therein a sum of Rs. 1,78,800 (Rs. one lakh seventy eight thousand and eight hundred) being the value of

14900 shares at Rs. 12 (Rs. twelve) per share, with interest on both the said sums at 6 per cent per annum from 15-10-1957 to the date of payment;

That the parties herein excepting the arbitrator do pay and receive the proportionate costs of these petitions as per the Award both before this court

and before the said Arbitrator when severally taxed and noted in the margin hereof with interest thereon at six per cent per annum from the date of

taxation to the date of payment; and in taxing the said costs, Advocate''s fee at Rs. 5000 (Rs. five thousand) for each party (treating D. R. Mahajan and

R. T. Perumal as one party) he allowed and that the said costs do also include the amounts paid to the Arbitrator already by the respondents 3 to 5 in O.

P. No. 275 of 1956;

That the liquidators, respondents 3 to 5 in O. P. No. 275 of 1956 shall be entitled to set off or adjust the payments they have made to the arbitrator

herein in the first instance in the said manner."" Respondent 1 is D. R. Mahajan, respondent 2 is R. T. Perumal and respondents 3 to 5 are liquidators of

the Neergundi company. The appeals now before us were then filed by the two share-holders respectively.

(3) Mr. O. T. G. Nambiar, learned counsel for the respondents-liquidators took up a preliminary objection that the appeals were not competent. He

mainly relied on the provisions of S. 17 of the Indian Arbitration Act which runs as follows:

Where the court sees no cause to remit the award or any of the matters referred to arbitration for reconsideration or to set aside the award, the court

shall after the time for making an application to set aside the award has expired, or such application having been made, after refusing it, proceed to

pronounce judgment according to the award and upon the judgment so pronounced a decree shall follow and no appeal shall lie from such decree except

on the ground that it is in excess of, or not otherwise in accordance with, the award.

It is necessary to refer to the other provisions of the Act to follow the contentions of the learned counsel on both sides. Under S. 14 when the Arbitrator

has made his award, he shall sign it and shall give notice in writing to the parties of the making and signing thereof. He shall then cause the award or a

signed copy of it together with any depositions and documents which may have been taken and proved before him to be filed in court and the court shall

thereupon give notice to the parties of the filing of the award. Section 15 gives power to the Court to modify or correct an award. Section 16 is very

material and is in the following terms:

(1) The Court may from time to time remit the award or any matter referred to arbitration to the arbitrators or umpire for reconsideration upon such terms

as it thinks fit-

(a) Where the award has left undetermined any of the matters referred to arbitration, or where it determines any matter not referred to arbitration and

such matter cannot be separated without affecting the determination of the matters referred; or

(b) where the award is so indefinite as to be incapable of execution; or

(c) where an objection to the legality of the award is apparent upon the face of it;

(2) Wherein an award is remitted under sub-s. (1) the court shall fix the time within which the arbitrator or umpire shall submit his decision to the court;

Provided that any time so fixed may be extended by subsequent order of the court.

(3) An award remitted under sub-s. (1) shall become void on the failure of the arbitrator or umpire to reconsider it and submit his decision within the time

fixed.

Section 30 provides that an award shall not be set aside except on one or more of the following grounds namely:

(a) that an arbitrator or umpire has misconducted himself or the proceedings;

(b) that an award has been made after the issue of an order by the court superseding the arbitration or after arbitration proceedings have become invalid

under S. 35;

(c) that an award has been improperly procured or is otherwise invalid.

Section 39 confers a right of appeal from certain orders and from no others passed under the Act to the court authorised by law to hear appeals from

original decrees of the court passing the order. Such appealable orders include: an order setting aside or refusing to set aside an award. Section 44

enables the High Court to make rules consistent with the Act inter alia as to the filing of awards and all proceedings consequent thereon or incidental

thereto. ""Court"" is defined in S. 2(c) as meaning a civil court having jurisdiction to decide the questions forming the subject-matter of the reference if the

same had been the subject matter of a suit.

(4) Mr. Nambiar''s contention was that the appeals purport to be against the decree passed by Balakrishna Iyer K., agreeing to the award and S. 17 of

the Act prohibits an appeal from such decree except on the ground that it is in excess of, or not otherwise in accordance with the award. According to

him such a ground does not exist in this case. He also contended that the validity of the order remitting the award cannot be questioned in these appeals.

(5) Mr. Gopalaswami Aiyangar for the appellants sought to maintain the appeals on several grounds. He attempted to get over the bar of S. 17 of the Act

by contending that the revised award according to which a decree has been passed is not in accordance with the award because the remittal order was

bad and consequently the only valid award must be deemed to be the original award made by the arbitrator and the decree now passed is certainly not in

accordance with that award. We are unable to agree with this contention which places such a strained construction on the language of S. 17.

The award referred to in S. 17 is the award which the Court accepts and following it passes judgment and decree. There is no indication in the Act as to

what should happen after the Court remits the Award. Sub-section (2) of s. 16 implies that the arbitrator shall submit his decision to the Court within the

time fixed by the Court. It is not clear whether the decision so submitted should be treated as a new award which has again to be filed. It is also not clear

whether the parties would urge their objections to the validity of the decision submitted by the arbitrator. The opening words of S. 16(1) appear to

contemplate the Court remitting the award from time to time.

It may be, if the Court is satisfied that one of the grounds mentioned in clauses (a), (b) and (c) of S. 16(1) exists in respect of the decision submitted by

the Arbitrator or as one may call it, a revised award it may again remit the award t the arbitrator. But if the court sees no cause to remit the award or to

set aside the award, the Court shall pronounce judgment according to the award and a decree will follow upon the judgment so pronounced. We are

unable to hold that because an order remitting the original award is bad, it follows that the decree passed on the basis of the revised award could be said

to be in excess of or not otherwise in accordance with, the award.

(6) Mr. Gopalaswami Iyengar''s next contention was that the appeals are maintainable, under cl. (vi) of S. 39 of the Act. The judgment of Balakrishna

Aiyar, J., accepting the revised award must be deemed to be also an order refusing to set aside the revised award. There was no formal application as

such to set aside the revised award but admittedly objections were filed to the revised award by the two appellants before us mainly on the ground that

the order of remittal was itself bad. These objections can be deemed to be applications to set aside the award. He relied on a decision of Chandra Reddi,

J. in Ramaswami Servai and Others Vs. Muthiralayee and Others, , in support of his contention. In that case notice of the filing of the award was served

on the party.

He filed a counter affidavit attacking the genuineness and validity of the award and prayed that the court may be pleased to dismiss the petition but there

was no application as such to set aside the award. The learned Judge held that the counter affidavit can tantamount to an application for setting aside the

award within the meaning of S. 17 of the Arbitration Act. A similar view was taken in Ram Alam Lal and Others Vs. Dukhan and Others, . It is true that

there was no formal order refusing to set aside the revised award but in the circumstances the order accepting the revised award should be deemed to be

a composite order comprising an order refusing to set aside the award. Vide Mt. Ishwar Dei Vs. Chhedu, and Antarijami Khadanga Vs. Ketaki Debi and

Others, .

So his argument ran. We did not understand Mr. Nambiar to say that no application to set aside a revised award could be filed, If that be not so, it would

mean that the court has no option except to pass a decree in accordance with the award which is invalid for any of the reasons mentioned in S. 30 of the

Act. All that he could say was that there was no formal application to set aside the revised award. But this technical objection is not supported by any of

the provisions of the Act.

(7) Mr. Nambiar, however, contended that the order of remittal cannot be questioned in these appeals even if they were competent. He relied on a ruling

of this court in Subbiah Iyer v. Subramania Iyer ILR 31 Mad 479, which was followed by the Lahore High Court in Baland Baksh v. Ram Chandra 84

Ind Cas 693: AIR 1925 Lah 267. There were also other decisions cited to us namely, George v. Vastian Soury ILR 22 Mad 202 and Vengu Ayyar and

Another Vs. Yegyam Ayyar and Others, , but in our opinion these decisions do not materially help us in this case because they all related to a different set

of facts. In those cases the arbitration was in a pending suit but there are observations in the decision, ILR 31 Mad 479, which prima facie appear to

support the contention of Mr. Nambiar namely,

It was not contended that an appeal would lie against a decree passed by the court in accordance with the award on the ground that the Court had

improperly refused an application for an order of remittal under S. 520, C. P. C. and the policy of the law appears to be to refuse to allow appeals

against decrees in accordance with awards on the ground either that an order under S. 520 C. P. C. was improperly made or improperly refused.

Much of the force of the observations is lost by the obvious fact that it was practically conceded that an appeal would not lie against a decree passed by

the court in accordance with the award on the ground that there had been an improper refusal of an application for an order of remittal. Mr. Nambiar

conceded that there was no right of appeal against the order of the Court remitting the award to the arbitrator. He also had to admit that the Court would

have jurisdiction to remit an award only on one of the grounds specified in S. 16 and under no other ground. If, therefore, the Court remitted an award on

any ground other than those specified in that section such an order would be without jurisdiction. We then asked Mr. Nambiar what was the remedy of

the party aggrieved by such an invalid remittal. Mr. Nambiar frankly stated that there was no remedy so far as he could see. We do not think that we

could subscribe to this result unless we are forced to. In our opinion one of the grounds on which a revised award can be sought to be set aside is that it

was the result of an invalid order of remittal. That was the first objection which the appellants took in their counter affidavits.

(8) In this view it is not necessary to consider the other contention of Mr. Gopalaswami Aiyangar that S. 39 of the Act would have no application to an

appeal under Letters Patent as it deals only with appeals from one Court to another. We hold that the appeals are competent.

(9) On the merits the only question which arises is whether Balakrishna Aiyar J. was justified in remitting the award made by the arbitrator on 17-6-1956.

The power of the Court to remit an award to the arbitrator for reconsideration is contained in S. 16 of the Indian Arbitration Act. It was admitted by Mr.

Nambiar learned counsel for the respondents who supported the order remitting the award that an award could be remitted only on one or more of the

grounds mentioned in clauses (a), (b) and (c) of S. 16(1) of the Act and on no other ground. AIR 1944 76 (Privy Council) where the Privy Council

observed:

The section specifies three sorts of defects which may necessitate reconsideration of an award and empowers the Court to remit the defective award in

the cases specified (and in no others) to the arbitrator or umpire and to fix the time within which the arbitrator or umpire is to submit his decision to the

Court.

(10) It was also his case that the only ground on which Balakrishna Aiyar J. remitted the award is that an objection to the legality of the award was

apparent upon the face of it. Mr. Gopalaswami Aiyangar, learned counsel for the appellants, contended that there was no such valid objection to the

validity of the award apparent upon the face of it. The reference to the arbitrator was made under S. 208-C(3) of the Indian Companies Act, which runs

thus:

If any member of the transfer company who did not vote in favour of the special resolution expresses his dissent therefrom in writing addressed to the

liquidator and left at the registered office of the company within seven days after the passing of the special resolution, he may require the liquidator either

to abstain from carrying the resolution into effect or to purchase his interest at a price to be determined by agreement or by arbitrator in manner hereafter

provided.

Sub-section (6) of the same section makes the provisions of the Indian Arbitration Act other than those restricting the application of the Act in respect of

the subject matter of the arbitration applicable to all arbitrations in pursuance of the section. What the arbitrator had, therefore, to decide was what is the

price of the interest of the dissentient members of the Neergundi Co., who are the appellants before us. The arbitrators arrived at the price of Rs. 18-15-

0 per share held by the appellants thus:

He estimated the value of the assets of the Neergundi company and deducted therefrom the liabilities of the company and took the balance as the net

value of the estate. He divided the amount of this value by the number of ordinary shares to fix the value per each share. The following extract from his

award gives details of the calculation. The valuation will be as follows:

Fixed Assets Rs.

Freehold land. ... 16,87,750

Buildings. ... ... 1,54,935

Plant and machinery. ...

... 19,627

Rs.

Furniture. ...

... 10,801

18,73,113

------------

Add motor cycle etc. as per liquidator''s statement ... 6,28,365

-----------

25,01,478

Less Liabilities ... ... ... 4,44,617

----------

Net value of the estate as on 1-7-1955 ... ... ... 20,56,861

-----------

Number of ordinary shares at Rs. 2 each: Rs. 108,538.

Value per share: Rs. 18-15-0 (omitting pies in the calculation).

The amount payable for Mr. Mahajan''s 5900 shares is ... Rs. 1,11, 731-4-0

The amount payable for Mr. Perumal''s 19500 shares is ... Rs. 2,82,168-12-0

In the course of his award the arbitrator confessed that no direct precedent was available as to how the interest of a dissentient member should be valued

under S. 208-C(3) of the Companies Act. He came to the conclusion that the interest of a dissentient share-holder was to be valued on the basis of his

interest in the assets of the company that had been wound up. He agreed with the contention of the appellants before us that the assets of the company

had to be valued and the price payable to the appellants should be fixed in proportion to the shares which they held in the company to the total number of

ordinary shares. He drew a distinction between the language of S. 208-C(3) of the Act and the language used in the earlier section, namely, S. 153-B

and observed:

Under S. 208-C of the Act it is not the shares of the dissentient share-holder that have to be purchased as in S. 153-B but the interest of the dissentient

share-holder has to be purchased at a price. What is the interest of a dissentient shareholder in a company which has been wound up? His interest can

only be in the assets of the company that has been wound up.

Balakrishna Aiyer J., held that the basis on which the Arbitrator proceeded was wrong, and that he erred in assuming that the dissentient shareholders

were entitled to be paid their proportionate share of the market-value of the net assets of the company. The reasoning of the learned Judge may be

summarised thus: The share-holders are not the co-owners of the properties of the company. Though the value of the assets of the company would be a

very material factor which would affect the price of the interest of the dissentient shareholder, the once cannot be fixed as a fraction of the other.

It is not correct to say in law that the Neergundi Co., stood wound up in the sense that it stood dissolved when the special resolution for winding up was

passed. The dissentient shareholder is not, therefore, entitled to a proportionate part of the break-up value of the assets in the undertaking for on the

dissolution of a company every member thereof is entitled to be paid his proportionate portion of the net assets of the company. He is so entitled to be

paid only out of the amount actually realised in exchange for the properties of the company, and not a proportionate portion of their market value. The

learned Judge pointed out what the arbitrator should have done but which he did not do. He stated,

He should have tried to find out what the price was which the interests of the dissentients would have fetched immediately before the resolution to wind

up was passed. He should have posed the question, how much would a reasonable man have been prepared to pay for that interest. No doubt a prudent

purchaser would take into account the value of the assets of the company in making his offer, but that would be only one consideration and the price of

the interest cannot be expressed as a fraction of the net assets of the company.

After holding that the arbitrator had proceeded on a completely wrong legal basis in determining the value of the interest of the dissentient member he

proceeded to indicate the various considerations and factors which should be taken into account in arriving at the proper price to be fixed. The learned

Judge wound up his judgment thus:

I recognise that it is not at all easy to make allowance for all these varying circumstances. Nonetheless the final conclusion must represent the result of the

examination of these factors. The question is not what is the net value of the assets of the company, and what is the fraction thereof that is represented by

the shares which the dissentients hold. The question is: If the interest of the dissentients is sold as a block, what money will it bring? That is the question

for which an answer must be found. I have set out various considerations that must be taken into account but these are not to be regarded as being

exhaustive."" In spite of diligent research, learned counsel appearing before us were unable to draw our attention to any decision of the English courts or in

India directly bearing on the question. The question therefore, falls to be decided on an application of the general principles of the company law and the

language of the material provisions of the Indian Companies Act. What a dissentient member is entitled to under S. 208-C(3) of the Indian Companies

Act is the price of his interest at which he can require the liquidator to purchase it. It is such a price that has to be determined by arbitration. We consider

that the implication of the words ""Purchase and price"" should not be overlooked. A notional sale is contemplated.

Obviously the interest of the dissentient member is dependent on the shares which he holds in a transferor company. A distinction was sought to be drawn

between the language in S. 153-B and S. 208-C. Section 153-B deals with a case of a scheme involving the transfer of shares of a company to another

company. It provides inter alia that if any shareholder dissents from a scheme involving the transfer of shares the shares of such dissenting shareholder are

bound to be acquired. A distinction is drawn between the acquisition of shares referred to in S. 153-B and the purchase of interest in S. 208-C of the

dissenting shareholder. We do not think that much can be made out of this difference.

Section 153-B deals with a case of a transfer of shares of a company which is a going concern and which has not been would up or directed to be

wound up; whereas S. 208-C deals with a case where the company is proposed to be, or is in the course of being, would up altogether voluntarily and it

is in the case of such winding up that the whole or part of the business or the property of the company is proposed to be transferred or sold to another

company. In the case of a company which is not being wound up it is appropriate to speak of the shares as being acquired the price being the price of the

shares at the market-value but when the company is being wound up there can be no question of sale or acquisition of shares as such. Hence the use of

the word ""interest.

(11) What is the interest of a shareholder by virtue of his holding the shares in a company? Farwell J. in Borland''s Turstee v. Steel Brothers and Co. Ltd.

1901-1 Ch 279, observed at page 288,

A share is the interest of a shareholder in the company measured by a sum of money for the purpose of liability in the first place, and of interest in the

second, but also consisting of a series of mutual covenants entered into by all the shareholders inter se in accordance with S. 16 of the Companies Act,

1862. The contract contained in the Articles of Association is one of the original incidents of the share. A share is not a sum of money settled in the way

suggested, but is an interest measured by a sum of money and made up of various rights contained in the contract, including the right to a sum of money of

a more or less amount.

The shareholders are not in the eye of the law part owners of the undertaking. The undertaking is something different from the totality of the

shareholdings. Vide Short v. Treasury Commissioners, 1948-1 K. B. 116 at p. 122. Reference was made by Mr. Gopalaswami Aiyangar, learned

counsel for the appellants to S. 211 of the Indian Companies Act, which runs thus:

Subject to the provisions of this Act as to preferential payments, the property of a company shall, on its winding up, be applied in satisfaction of its

liabilities, pari passu and subject to such application shall, unless the articles otherwise provide, be distributed among the members according to their

rights and interests in the company.

He contended that this provision indicates the right of a shareholder to obtain a proportionate share of the net assets of the company because at the end

of the winding up after all liabilities have been met and all preferential payments have been made the property of the company is distributed among the

embers including the shareholders. In our opinion this section does not support the argument which is involved in the contention of the appellant''s learned

counsel that at any given point of time a shareholder is notionally entitled to an aliquot part of the net assets of the company.

It may be that the prospect of distribution such as is contemplated under S. 211 at the conclusion of a winding up, would be a material factor in assessing

the value of the interest of a shareholder, in virtue of his holding shares in the company. Undoubtedly if the net assets which will be available for

distribution are likely to be of considerable value then the value of the interest of the shareholder will also be enhanced. It is not tantamount to saying that

the value of the interest is an arithmetical fraction of the estimated market-value of the net assets of the company on the date of the winding up or on the

date when the resolution is passed for the transfer of the business of the company to another company.

(12) Before Balakrishna Aiyar J. and before us certain decisions of the English courts were cited. Admittedly none of these directly bears on the question

which falls to be decided. We shall, therefore, briefly refer to some of them. In re Imperial Land Co. of Marseillis, (Vinning''s case) (1870) 6 Ch. A. 96,

a company having resolved on a voluntary winding up, and reconstruction of the company, with a new capital, new articles and new name, a dissentient

shareholder gave notice to the liquidators under S. 161 of the Companies Act, 1862, requiring them to purchase his interest in the company. The

liquidators took a transfer of his shares.

After the transfer the dissentient shareholder''s name was placed on the list of contributories on the ground that he was still liable to any future calls for

payment of the liabilities of the company. Sir Malins V. C. held that as the shares were sold by him to the liquidators after the transfer he ceased to be a

member of the company and his name must, therefore, be taken off the list of contributories. The court of appeal reversed the decision of the Vice

Chancellor and held that under S. 161 the liquidators had no power to release the dissentient shareholder from his liability to the creditors but only to

purchase such interest as he had in the assets of the company and consequently that the shareholder''s name must be put on the list of contributories. The

following observations of Sri Mellish L. J. at page 102 must be understood in the context of the actual points which arose for decision in that case. He

said,

The section says that a dissentient shareholder may give notice to the company ''either to abstain from carrying such resolution into effect, or to purchase

the interest held by such dissentient member at a price to be determined in manner hereinafter mentioned.'' What is the meaning of the words ''purchasing

the interest held by such dissentient member?'' Does it mean purchasing his shares and having them transferred? Surely it would have been easy for the

legislature to have said ''and to purchase the shares of the dissentient member'', if that is what they meant. But what they say is ''to purchase the interests

held by such dissentient member'', that is to say, to purchase the interest which a shareholder of the company has in the assets of the company that

company being in the course of being wound up. The Shareholder has still an interest in the assets of the company. He is entitled to a share in whatever

surplus there may be.

Further on the significance of these observations is brought out by the following subsequent passage:

I am of opinion that by the 161st section, all that is contemplated is, that the interest of the shareholders in the company that is being wound up should be

sold, and the purchase money of it paid, but that it is not contemplated that the shares themselves should be transferred.

These observations do not carry us very far because they do not support the basis of the arbitrator''s award, namely, the award of a proportionate share

of the estimated value of the net assets of the company as the value of the interest of the share-holders.

(13) In Re Mysore West Gold Mining Co., (1889) 42 Ch. D 535, the only question which directly arose was whether a commission could issue for the

examination of witnesses abroad pending a reference to arbitration for the ascertainment of the price to be paid for the purchase of the interest of a

dissentient member under S. 162 of the Companies Act, 1862, corresponding to S. 208-C of the Indian Companies Act, 1913. The Mysore West Gold

Company passed a resolution to wind up voluntarily and for the sale and transfer of its business and property to a new company. By agreement between

the liquidator of the said Mysore West Gold Company and the new company it was agreed inter alia that three of the shares of the new company were to

be given in respect of two fully paid up shares in the old company.

The holders of certain shares in the old company served on the liquidator notice of dissent from the scheme calling upon the liquidator either to abstain

from carrying into effect the resolution for reconstruction or to purchase their interest at a price to be determined by arbitration. The arbitration was

commenced and during the course of the arbitration for the purpose of ascertaining the value of the company''s assets which consisted of gold mines in

India, and shares in another company having gold mines in india, the liquidator took out summons for liberty to issue a commission to India for the

examination of witnesses there. It was held by Chitty J., that the court had jurisdiction to order such a commission. In the course of his judgment Chitty J.,

dealt with an argument that the liquidator must value the interest of the dissentient member according to the valuation which had been made in the

agreement between the old company and the new company of the interest of the other non-dissentient members thus:

Now I think that the fact of such a valuation being the basis upon which a reconstruction has been effected is to be carefully considered and to have due

weight give to it, but it is not in itself conclusive so as to fix the proper price which the liquidator should pay in respect of the interest of a dissentient

member. Where a new company is purchasing the assets of a company in liquidation and the new company brings new capital into the concern, it does

not all follow that the price per share as fixed between the company in liquidation and the new company forms the true price which has to be determined

by the arbitration.

It is often worth a man''s while if he has capital to buy a concern which had come to a standstill for want of capital; he might give what after all was a fair

price as between vendor and purchaser, but much more than the breaking-up price obtainable in the market. The dissentient member cannot ask for a

valuation as between vendor and purchaser, because the company, so far as he is concerned, has come to an end, and he is in the position of a man who

has not got capital wherewith to buy the concern which has come to a standstill for want of capital.

We are unable to derive much assistance from this case either except to the extent that the value of the assets of the company would have a material

bearing on the value of the interest of the dissentient member.

(14) What should not be overlooked is that under S. 208-C(3) what the arbitrator has to determine is the price at which the interest of the dissentient

members should be purchased by the liquidator. The price assumes a sale at least notionally. The market may be hypothetical. Danckwerts, J., explained

in Holt v. Inland Revenue Commissioners, 1953 2 All E. R. 1499, that a market is to be assumed from which no buyer is excluded and at the same time

the Court must assume a prudent buyer who would make full inquiries and have access to accounts and other information which would be likely to be

available to him. In the words of WynParry J., In Re Press Caps Ltd., 1949 1 All E. R. 1013, ""a valuation is only an expression of opinion, It may be

made on one of a number of basis but the final test of what is the value of a thing is what it will fetch if sold"".

(15) In fixing the price of a dissentient member''s interest the arbitrator certainly will have to take into account the assets of the company and its liabilities

but he will have to take into account several other factors as well. It is not necessary for disposing of these appeals to give an exhaustive list of such

factors. Indeed Balakrishna Aiyar J. after mentioning a few such factors concluded by saying that they were not exhaustive. It is sufficient for the disposal

of these appeals to say that the basis of the arbitrator''s first award was totally wrong in law, namely, the determination of the price by dividing the

estimated market-value of the net assets of the company by the number of ordinary shares. Adopting that basis he has practically equated the position of

a shareholder to that of a tenant-in-common along with the other share-holders in respect of the company''s assets. Balakrishna Aiyar J., was therefore,

justified in remitting the award back to the arbitrator for reconsideration inasmuch as the award which the Arbitrator had made was vitiated by the

adoption of a wrong legal basis in fixing the price of the interest of the dissentient members.

(16) If the order of remittal was valid and proper Mr. Gopalaswami Iyengar did not contend that he should ask the Court to set aside the revised award

on any of the grounds mentioned in S. 30 of the Arbitration Act. That award, therefore, stands and so will the decree which followed that award. The

appeals fail and are dismissed with costs.

(17) Appeals dismissed.